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Muted Loan Growth, Low Rates to Hurt Zions' (ZION) Q4 Earnings

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Zacks Equity Research
·5 min read
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Zions Bancorporation ZION is scheduled to report fourth-quarter and 2020 results on Jan 19, after market close. Loan growth remained muted in the to-be-reported quarter, owing to the pandemic-related scare. In fact, similar to the third quarter, commercial and industrial loans (constituting a large part of Zions’ loan portfolio) witnessed a considerable decline in the quarter.

Moreover, the Zacks Consensus Estimate for Zions’ average interest-earning assets for the fourth quarter is pegged at $73.3 billion, which indicates only a marginal rise from the previous quarter’s reported number.

Thus, owing to muted loan growth along with near-zero interest rates, Zions’ net interest income (NII) — which is its main revenue component — is not expected to have improved in the quarter. The consensus estimate for NII of $547 million indicates a 1.4% decline sequentially.

Now, let’s have a look at the other key factors that are likely to have impacted Zions’ fourth-quarter performance.

Fee Revenues: Historically-low mortgage rates continued to fuel demand for new mortgages in the fourth quarter. As the stay-at-home orders were lifted and the economy gained traction, a substantial rise in mortgage originations was witnessed as prospective home-buyers entered the housing market again to take advantage of the low rates. Also, refinancing activities increased in the quarter. Thus, owing to solid mortgage-banking business performance, Zions’ loan sales and servicing income is likely to have improved in the quarter.

Also, despite the continuation of economic slowdown because of the pandemic, consumer spending witnessed improvement in the fourth quarter compared with the first half of the year. Thus, Zions’ card fee is expected to have improved in the quarter.

The consensus estimate for total customer-related fee (accounting for more than 85% of total non-interest income) shows that this component is expected to have improved in the quarter. The Zacks Consensus Estimate for the same is pegged at $142 million, which indicates a 2.2% increase from the previous quarter.

The consensus estimate for total non-interest income for the fourth quarter is pegged at $144 million, which indicates a decline of 8.3% on a sequential basis.

Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. In fact, as the company continues to invest in franchise, overall costs are expected to have remained elevated in the fourth quarter as well.

Asset Quality: The Zacks Consensus Estimate for total non-performing loans for the fourth quarter is pegged at $410 million, suggesting a 12% rise from the prior quarter.

What Our Quantitative Model Predicts

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Zions is +3.79%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Q4 Earnings & Sales Growth Expectations

The Zacks Consensus Estimate for earnings is pegged at $1.01 per share, which suggests a decline of 11.4% year over year. The figure has been revised 5.3% upward over the past 30 days.

The consensus estimate for sales is pegged at $701.04 million, which indicates a 1.4% decline from the prior-year reported figure.

Zions Bancorporation, N.A. Price and EPS Surprise

 

Zions Bancorporation, N.A. Price and EPS Surprise
Zions Bancorporation, N.A. Price and EPS Surprise

Zions Bancorporation, N.A. price-eps-surprise | Zions Bancorporation, N.A. Quote

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for Commerce Bancshares, Inc. CBSH is +0.99% and it carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on Jan 20.

BankUnited, Inc. BKU is slated to release earnings figures on Jan 21. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +2.46%.

Capital One Financial Corporation COF is slated to release earnings figures on Jan 26. The company currently carries a Zacks Rank #2 and has an Earnings ESP of +3.50%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


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Capital One Financial Corporation (COF) : Free Stock Analysis Report
 
Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
 
Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
 
BankUnited, Inc. (BKU) : Free Stock Analysis Report
 
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